Right now the hubbub In the real estate industry is that it is a seller’s market. But what exactly does it mean? Clearly it means sellers have an advantage. But why and how much? And how can you tell it’s a seller’s market or a buyer’s market?
So let’s look at exactly what makes a seller’s market and why seller’s are at an advantage.
Supply and Demand
It’s a case of supply and demand. Seller’s markets happen when there is low inventory and high demand. In real estate low inventory means that there are not a lot of houses listed for sale and high demand means that there are a lot of buyers. So that means when a desirable house comes on the market there are usually multiple offers (competition) which will drive the price up.
It’s the opposite for a buyer’s market. A buyer’s market is when there are a lot of listings and not a lot buyers looking. So buyers can make lower offers and negotiate and prices usually come down.
How Can You Tell If It’s A Seller’s Market?
How can you tell if it’s a seller’s or buyer’s market? Besides noticing that when property comes on the market it sells very quickly and possibly with multiple offers and at a higher price there’s also numbers that we can look at.
The number we use is called the Absorption Rate. We calculate that by taking the total amount of properties listed for sale and divide by the average number of properties sold per month.
The absorption rate tells us how many months it will take to sell all the properties currently on the market (the inventory). If there is less than six months if inventory it is a seller’s market. If there is more than six months inventory it’s a buyer’s market.
Is ALL of New Jersey A Seller’s Market?
A seller’s market doesn’t necessarily mean the entire state or even a whole city.
Seller’s markets can exist in:
- A certain price range – Ex: Homes under $200,000
- Homes with a certain feature -Ex: Homes with a 2 car garage
- A neighborhood –
- Proximity to public transportation
- A specific condo or town home complex
- A specific school district
- Proximity to the water
- A Combination of these – Ex: 3 bedroom 2 bath homes between $350,000-$400,000 near the train station in a certain town.
How Can You Take Advantage Of A Seller’s Market?
- Well first of all the most obvious way is to actually list your house for sale. Many people sit back during a seller’s market and wait for prices to go up without realizing while the price of the home you are selling may be going up the price on the home you are buying may be going up as well.
- Pay attention to WHAT is selling and AT WHAT PRICE. Many people hear that it’s a seller’s market and automatically think they can get more money for their home so they list it at a price that is too high and then their home sits on the market.
Ultimately your pricing and marketing strategy have to be tailored not only to your house, and neighborhood but to the market you are in.